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tv   Inside Story  Al Jazeera  February 15, 2014 5:30pm-6:01pm EST

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strove if you are watching this over . at a time number 1 and number 2 cable providers in the u.s. are merging to create a new giant. you are watching this program over a cable. is this bad news, good news, or to be determined? >> "the inside story." hello. i am ray suarez.
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comcast is an enormous company, the largest in the world by revenue it owns eentertainment, the golf channel, universal pictures, theme parks and digital broadband. time warner is another enormous company. it owns cable operations in 29 states, local news and sports channels. internet and cloud computing services. now, the two plan to become one, merging the first and second largest cable providers in america to control a big share of the american cable t.v. market and put the other competitors in the shade. if you are watching us on television, you are, by definition, a cable t.v. customer. whether you get your service from comcast, time warner or another company, this merger may have long-term impact on a product you buy. what this massive merger will mean for their competitors and thetentions of millions of
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customers who buy cable, internet and other communication services is "the inside story." "the two cable goliaths are planning to join forces by the end of this year. comc comcast would ab some time warner. >> i think it's an incredibly exciting opportunity for time warner cable customers. the move will first affect the 33 million subscribers. the. >> the technological i know ovation that's going to be enabled by the two companies coming together, i think, can be truly spectacular. new products, better products and just a faster pace of change. i am excited about it. i think the opportunity for our customers is just terrific. >> negotiations between time warner and another cable company, charter communications crumbled, opening the door for comcast. charter had offered $38,000,000,000. but as the two teams rejoice, the massive merger is raising
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questions from consumer groups. will the new cable providerinder competition and options for subscribers? comcast ceo brian roberts played down concerns thursday. >> as we look at any competition of which there is much in video, whether it's directv, dish, at&t, fios, verizon, this allows us to compete better by bringing our into new markets >>. >> robert marcus agreed? >> no reduction in competition, improved customer experiences and we think that this will clear all of the regulatory hurdles and we will get done. >> comcast is also a major player in broadband. the comcast deal brings new focus on the ongoing battle over net neutrality, the right of content providers to have equal access to the internet. net neutrality is inblimbo after a u.s. court of appeals struck down fcc regulations. the court ruled the fcc does
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have regulatory authority, but it used the wrong legal justification. so now, the fcc can rewrite the rules or congress can act. the concern is that comcast and other broadband providers could give preampcial treatment to their own produced content and that, critics say could drive up the price for consumers. the planned acquisition comes at a critical time in the history of cable television. over all subscriptions and ratings are on the decline. online video on demand services like netflix and hulu are on the rise. a new wave of court cutters, households opting out of cable television are putting pressure on cable providers like time warner and comcast. time warner lost close to 1 million cable t.v. subscribers in 2013 and more than 5 million subscribers opted out of cable overall between 2010 and 2013.
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the merger that seeks to join two big players in american communications: comcast and time warner cable on this edition of "inside story" joining us now, craig aaron, the president and ceo of free press which advocates for diverse media ownership. from new york, davis gillis, a reporter with the "new york times" who covers mergers and acquisitions and dealbook and barr barron voka, with a technology policy think tank. david gelles, you tweeted, in surprise at how quickly this moved along. was there no long mating dance did a before this announcement? >> these two companies have been in touch over the years. what's happened over the last couple of months is that charter communications has really made a push to try to get a deal done with time warner cable. now, time warner cable was never comfortable with this idea. charter was going to have to
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take on a lot of debt to get the deal done. they wanted to do a good portion of the deal in stock. and time warner cable believed charter stock after a deal would not be that valuable conduction see. when rob marcus took over as ceo of time warner cable just last month in january, he quietly reached out to brian roberts, the ceo of comcast, we have recently learned. he said, let's restart these deal talks. over the last couple of deeds, those deal talks proceeded but even then they couldn't get there. after brian roberts went out a road show, after fourth quarter earnings on january 28th and he heard from comcast's main investors that they, in fact, wanted a deal to be done between comcast and time warner cable did brian roberts come back just 10 days ago or so, called back, rob marcus, and say, let's get this dong. just in the last week, the two sides hammered out final deta s details. >> there were those worries you mentioned about stock, this deal from comcast is for all stock.
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>> rob marcus on the call today, he said, that's apples to oranges. he said charter stock, even with some cash, is not nearly as valuable as comcast stock. the reason is that charter was going to have to lever up so much, take on so much debt that the company really would be barely investment grade perhaps. comcast stock, on the other hand, is now going to be backed up not only by the largest colleges of cable operate orb subscribers but by nbc universal which it acquired last year. >> let me go back to washington to barron soka. you heard the two executives of the companies involved talking about how good this was going to be for the could have been assumer. ceo brian roberts from comcast called it in no way anti-competitive. is this really good for customers? why? >> i think it is, and he's certainly right. the thing to understand is that cable companies, there is generally only one co-pay cable company in any given market. so they don't compete directly
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with each other. what we are talking about here isn't reduction in questions. you would simply have in some markets, time warner would simply be replaced by comcast, so comcast would simply have a larger footprint. the concern about mergers like this has never been about what that sort of what we call horizontal competition. it's always been a sort of vertical concern. >> is it's been a concern that maybe if a cable provider got too large, maybe they would have too much leverage over video programmers. it's important to note here, number 1, that first of all, that cuts both ways. in some respects, that sort of leverage can actually very much help connell assumers because right now, the reason cable bills are going up is that the real power of the market powur n this industry is really held by the content owners. they are the ones who are extracting more and more in royalties every year for cable channels. >> that's what gets passed on at the ends of the day to consumers. if comcast gangs some leverage here, it actually may help in that respect a company like
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comcast might favor itsina filliated contents or might be able to stop some other new cable market, new cable program or channel from gaining a minimum viable scale. it's important to note here that the fcc has twice tried to implement a 30% cap on the size of a single cable operator. it's twice failed. then struck down in court because the fcc never justified that 30% cap adequately. >> this new company would control roughly 30% of the cable market. >> and indeed, that's very deliberate. the company has said that they will voluntarily divest, sell off, some of the time warner cable subscribers in order to stay below that 30% goal which, again, is not a legal threshold, but it's basically what the fcc has always seemed to think would actually -- could potentially be a problem. so en if that was a problem, we are not en there. >> craig aaron, is this as
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benign a deal as we just heard baron describe it? >> i don't think so. i think this deal would be unquestionably a disaster for consumers. i think they will feel it in their wallets. we will see bills go higher and higher. we are talking about the largest cable in the country, the largest internet service provider in the country scooping up the number 2 cable company. this is going to give comcast an i immense amount of power over what with watch, see, they're and download every day. i would say too much power. i don't see that this deal is in the public interest at all. i think comcast is moving very aggressively here, but it's very important that the justice department and the fcc scrutinize this deal. deals like this are why we have anti-trust laws. deals like this are why the fcc needs to measure: is this deal in the public interest? i don't see how they are going to find that it is. >> wouldn't this concentrate, baron, give this new company pricing power and, also, product
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offering power that others don't have, because they are contents producers service providers and control such a big share of the overall market? >> no one is saying that the deal shouldn't be scrutinized. it certainly will. >> i think what's livekely to happen is that the fcc will find that the conditions that were imposed on comcast when it bought nbc several years ago, those conditions will be extended to time warner cable subscribers. i am a little surprised because somebody like craig who believes very strongly in net neutral at this time rules should see this as a victory because the net neutrality rules were, of course, struck down by the dc sishth even though the fcc can enforce them in an informal way or issue new rules. comcast is still subject to those same rules. and now, 8 million more will be subject to those rules. there might ab need for conditions on this deal. those conditions are probably largely already in place by
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virtue of that previous merger. >> david gelles, with big mergers of this kind, often the parties going in to the regulatory process concede that they are going to have to do some things to sweeten the deal before the regulators. baron mentioned some of those steps. do we know publicly what the two companies plan as their pitch to the regulators involved to make sure that there is no market control anti-trust problems? >> well, some of that was just covered. but there is also another interesting little deal technique that everyone on wall street is scrutinizing today. >> that's the absence of a reverse break fee, which is to say that there is no stipulation that if the deal falls apart that comcast would have to pays time warner cable a billion dollars, $2,000,000,000 that sometimes shows up in deals like this that attract some anti-trust scrutiny but in this case, the parties decided that not having a break fee is actually a sign of streamed and
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a sign of faith that the deal will get done. some of the last minute negotiations, we have learned, were actually time warner cable saying, okay. we will go alone without a break fee if you commit to divesting those 3 million subs to get to that 30% level and, also, if you commit to extending some of those net neutralities. about so this is on their mind but everyone we talked to today beliefs this deal can get done. >> we will talk more about net n neutrality and what it means when the two companies involved are so heavily invested in the internet. we will take the short break, and we will hit that when we come back. this is inside story. >> no doubt about it, innovation changes our lives. opening doors ... opening possibilities. taking the impossible from lab ... to life. on techknow, our scientists
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bring you a sneak-peak of the future, and take you behind the scenes at our evolving world. techknow - ideas, invention, life. on al jazeera america
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>> i'm joie chen, i'm the host of america tonight, we're revolutionary because we're going back to doing best of storytelling. we have an ouportunity to really reach out and really talk to voices that we haven't heard before... i think al jazeera america is a watershed moment for american journalism welcome back to "inside story." we are back to "inside story." i am ray suarez. splashy media energiers are nothing new. remember when sghooe bought abc or aol bought time warner. comcast bought nbc universal or when google bought youtube. you need a score cord to follow it all. the news today is a huge play in cable. comcast wants to buy time warner cable for 4 $4 by billion dolla.
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number 1 takes over number 2 to create a bigger number 1. this merger is about a lot more than just cable t.v. and on our program today, we are discussing what it means for the business of media and for you, the consumer. craig aaron, we should talk about net neutrality. the internet is important to both of these companies? >> this deal in many ways is all about broadband. it's the future. comcast is the nation's largest internet service provider. time warner cable as a big footprint as we talked about earlier. so in the end, i think in many ways, this is about broadband. this is about an effort by companies like comcast to keep typing that product, a very profitable company to them to their television services. if they can keep you subscribing to keep the content you want to see online, that's good for their business. for most americans, these
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compacable companies and this cable company might be their only option. not in every market but in most places if you want truly high-speed internet, you are talking about the cable company. if this happens, that company will be comcast. >> how does net neutrality and the rules and the debate about the future of the regulation of the internet play into this corporate merger, baron? >> it's a red herring for two reasons. comcast is subject to, as i mentioned earlier, the net neutrality rules. they agreed to that when they bought nbc, and that condition runs until 2018. they might extend it here. even if they don't, the fact of the matter is the fcc didn't really lose the net neutrality case. they simply had their order struck down. the fcc actually had the court grant them broad authority to regulate much more than they even tried to do with their open internet orders. the fact of the matter is that while i think the fcc should be more careful, they have broad authority to regulate. for that reason, i think that's precisely why you will see the merger go through, because if
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there is a concern in the future, the fcc can always address it then. and the conditions that are in place today are not just about net neutrality but about making sure that comcast doesn't leverage media content it bought from universal against other networks to make sure it doesn't discriminate against over-the-top video providers. those should allay the concerns here this means better broadband for time warner cable subscribers. comcast has upgraded speeds 12 times over the last 12 years. it offers faster speeds in many markets than time warner cable does. so, if what we are concerned about here is americans getting better broadbastband, this is great for consumers. it's supposed to save 1 and a half billion dollars in efficiencies of running the two companies together david gelles, we hear so much about cable cutters. does this position the company in a different way to handle a public that's already starting
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to look past cable t.v. as a product? >> certainly. and this is something that brian roberts, the ceo of comcast has been working on for several years. if you look back to the rationale of the nbc/universal deal, that was about creating a company that had both content and distribution. this now, you know, pushes the distribution side, but it impasse sizes the future is going to be over the web, not television pipes. >> the web enters a lot of homes via cable television? >> by far, the number 1 source for high-speed broadband, 85% of americans. it's their option if they want truly high speed broadband. >> that's the kind of power cable is going to have over what we watch, see, hear and read and their ability to interfere with that connection in the future after 2018, not that far down
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t the line s problematic, their ability to potentially impose data caps, their ability to, you know, slow down things like netflix and potential competitors, favor their own content. this is their own vision. this is what they have talked about when they are in talking to their fellow companies, when they are add trade shows. the reason there is a net neutrality condition on the comca comcast-nbc merger is because comcast was caught blocking lawfully file sharing. they have a record of this t it's pretty cold comfort to me that comcast is now indicating on day 1 of this giant merger that, oh, no, no, no. we are going to respect net neutrality forever. don't worry. you can trust us. what you never here on the list of all of these great consumer benefits that are coming from this merger are lower prices. >> never comes. because the only direction that cable prices have gone are up, up and up again. >> again, the concern has always been as i said earlier about vertical pressure.
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>> that's to say the fcc, congress, wasas always afraid if cable providers got too big they would have too much leverage over programming. i will stipulate that could be a concern. it certainly was in the 1990s when most cable channels were owned by cable operators but that number, that percentage affiliation is very low today. what we are really talking about is a situation where comcast is already has its hands tied to it can't leverage its own content. okay? what it can do is stand up -- >> for four years? >> for four years and it may be for longer. ebb wh-- even when that expires the fcc has rules and broad authority under the decision that the d.c. circuit handed down. there is anti-trust law. the point i am making is simply craig is complaining about two problems, which i actually would agree with him on. the second problem he mentioned is the cable bills are rising. i would suggest to him that that is not necessarily because of cable companies. it's because the people that really have the power here are the programmers and the fact of the matter is that sometimes,
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it's easier to fight market power with market power. sometimes, that's the only way it can be done. a combined company could actually get better deals for consumers and, yes, you might in fact see prices fall or not rise as fast as they would have. >> we will talk about the power of the programmers after this break because this creates a company, this merger, if it goes through, that is powerful as a programmer as well. time for us to take a short break. when question come back, we will talk about the future of what you read, listen to watch ain your home. this is "inside story." al jazeera america sundays. >> it was almost a miracle. >> revealing interviews. >> everybody's worked with a gay person. >> the latest in science and technology. >> i'm walking, you guys! >> when you look at crickets you don't necessarily think food. >> eye opening reports that make a difference. >> certain to dominate political discussions. >> award winning documentaries. >> i think a person has the right to know where the hell they come from. >> your house is the same size
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on al jazeera america story." i'm ray welcome back to "inside sto
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story." i am ray suarez. how we connell assume media in this country is changing, well, at the speed of the internet. and as always, the media business is reacting and adapting. comcast, the biggest player in cable is going to get much bigger with the acquisition of time warner. on this edition of our program, we are discussing the deal and what it tells us about the future, and david gelles, you were trying to jump in before the break. sorry. go right ahead. >> there is, indeed, an arms race going on between the distributors and the content providers. one of the things we learned recently is that discovery communicatio communications, the majoror provider of discovery, an ma planet, et cetera, recently considered doing a deal for scripts, another big cable network provider. but one of the reasons they didn't do it is because they feel like they have got enough leverage now. what they said, what people close to that deal that almost happened said was, if the cable operators get any bigger, though, we may have to
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confirmedate further. so this deal could spark yet another round of con solidation on the content side and that is just to say that this arms race is still going to rage for years and years. and to be sure, it is driving up prices for cable subscribers. but looking at what the cable content providers have planned, there is little reason to think that that's going to stop any time soon. >> craig, would this company if the deal was going to go through have to promise that it wouldn't play hardball on channel placement, on carriage of different content provider's offerings, in the ways that they would have the power to really be very muscular about what americans see on cable television? >> i think they might promise anything to get this done but i think any merger conditions of that sort have been very hard to enforce. as administrations change and as different people are there, we haven't seen it. i think the advantages are in
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building up those muscles. if you hate the cable guy, you are really going to dislike the cable geosteroids. >> that's what this -- geosteroids. it's getting rid of a lot of competitive press. if you are comcast, you are happy to see them rise. >> goes in your other pocket. this is a situation where they may make promises and ainsurance but for the cable customer, for the viewer, this is really a lose-lose situation where it's going to hit them in their wallet. it's going to leave them with fewer choices in the longrun and it's going to put comcast in a really powerful gatekeeper role over the future of internet and t.v. and because of their marv size and reach, they are going to be calling a lot of the shots. >> why wouldn't this combined company use its power in that way? that's one of the reasons companies get big, isn't it, in order to have market power and
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control marketplaces for their products? >> sure, but number one, they agreed when they bought nbc to a set of conditions that present them from doing what you just described. even after those conditions expire, whether or not they are extended in this deal, the fcc still has quite broad authority to police those negotiations. now, if what you are concerned about is as you think the cable company is going to get bigger, the cable market share has decreased. comcast is not the number 1 video distributor. >> that's a satellite company. they have chipped away steadily at the market share of the cable companies over the years. what we have seen over the years is competition from a new source, new insurance in the broadband company like ver eyiz built out of fiber network in most of the country. google building its own fiber network. centurylink. this is where i would agree with craig. we should do everything we can,
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frankly, to make sure those companies have as easy a time as possible and don't have to go through burden some, regulatory hurdles to roll out fiber because if that's the problem, that we don't have enough competition in broadband, we can deal with that program. if we spent the next six months that would otherwise be wasted arguing this deal and conditions that are already in place, park talking being encouraging broadband action we could make the market more competitive. >> we will have to talk about what the future holds about people trying to get content in their holmes. >> that's in flux. thanks to all of you for being with me today. >> brings us to the end of this edition of "inside story." in washington, i am ray suarez.
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